Correlation Between Crown Crafts and Natuzzi SpA

Can any of the company-specific risk be diversified away by investing in both Crown Crafts and Natuzzi SpA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Crown Crafts and Natuzzi SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Crown Crafts and Natuzzi SpA, you can compare the effects of market volatilities on Crown Crafts and Natuzzi SpA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Crown Crafts with a short position of Natuzzi SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Crafts and Natuzzi SpA.

Diversification Opportunities for Crown Crafts and Natuzzi SpA

-0.09

Correlation Coefficient

Crown Crafts  Natuzzi SpA

Good diversification

The 3 months correlation between Crown and Natuzzi is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Crown Crafts and Natuzzi SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natuzzi SpA and Crown Crafts is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Crown Crafts are associated (or correlated) with Natuzzi SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natuzzi SpA has no effect on the direction of Crown Crafts i.e., Crown Crafts and Natuzzi SpA go up and down completely randomly.

Pair Corralation between Crown Crafts and Natuzzi SpA

Given the investment horizon of 90 days Crown Crafts is expected to generate 881.14 times less return on investment than Natuzzi SpA. But when comparing it to its historical volatility, Crown Crafts is 32.49 times less risky than Natuzzi SpA. It trades about 0.0 of its potential returns per unit of risk. Natuzzi SpA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  743.00  in Natuzzi SpA on September 18, 2024 and sell it today you would lose (298.00) from holding Natuzzi SpA or give up 40.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.36%
Values	Daily Returns

Crown Crafts  vs.  Natuzzi SpA

Crown Crafts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Crafts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Crown Crafts is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Natuzzi SpA

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Natuzzi SpA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Natuzzi SpA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Crown Crafts and Natuzzi SpA

The main advantage of trading using opposite Crown Crafts and Natuzzi SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crown Crafts position performs unexpectedly, Natuzzi SpA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Natuzzi SpA will offset losses from the drop in Natuzzi SpA's long position.

The idea behind Crown Crafts and Natuzzi SpA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.